We examine the joint predictability of return and cash flow within a present value framework, by imposing the implications from a long-run risk model incorporating both time varying volatility and volatility uncertainty. We provide new evidence that the expected return variation and the variance...

Recent empirical evidence suggests that the variance risk premium predicts aggregate stock market returns. We demonstrate that statistical finite sample biases cannot “explain” this apparent predictability. Further corroborating the existing evidence of the U.S., we show that country...

The goal of this study is to compare the CAPM to the Fama-French (FF) Three Factor Model and to Carhart‟s extension of the FF Model with regard to (1) statistical goodness of fit, and (2) the quality of prediction. My sample consists of actively managed domestic equity mutual funds and the...

We extend the constant discount factor model with intrinsic bubbles developed in Froot and Obstfeld (1991) to account for serial correlation in dividend growth rates. We derive an exact analytical expression for both the present value stock price and an intrinsic bubble component when dividend...

We obtain new methodological and empirical perspectives on the fundamental risk-return tradeoff in stock returns by imposing economic and asset pricing motivated constraints on the equity premium. In contrast to highly ambiguous past empirical findings, these constraints result in a nonlinear...

This article is a review on the impact of prices and their dependence on the cost of oil and natural gas on the world stock markets. The main studies and results achieved in the field of the impact of prices on both the stock index and industrial stocks and the dependence on the level of oil...

We propose a novel consumption measure that has a daily frequency and is based on real-time shopping data. Our measure explains the joint equity-premium–risk-free-rate puzzle with a risk aversion coefficient much lower than any other consumption measures. It encompasses other consumption...

We study overreaction and the cumulative effect of the consecutive local overreaction patterns in financial markets. The 'overreaction diamond' pattern [1] is one of the key components of a financial market bubble. The cumulative effect of the consecutive short term overreactions arising from...

In this article we provide evidence for a rational bubble in S\&P 500 stock prices by applying a test for changing persistence under fractional integration proposed by Sibbertsen and Kruse (2007). We find strong evidence for stationary long memory before the estimated change point in 1955 and a...

The behaviour of market agents has always been extensively covered in the literature. Risk averse behaviour, described by von Neumann and Morgenstern (1944) via a concave utility function, is considered to be a cornerstone of classical economics. Agents prefer a fixed profit over uncertain...